On 7 November 2016 Hong Kong’s Market Misconduct Tribunal (MMT) made its first finding against a listed company in proceedings brought by the Securities and Futures Commission (SFC) in relation to the disclosure obligations imposed on listed companies under the Securities and Futures Ordinance (SFO) since they became effective on 1 January 2013. The MMT found that AcrossAsia Limited (AcrossAsia), its former chairman, Mr Albert Saychuan Cheok and chief executive officer, Mr Vicente Binalhay Ang failed to disclose highly sensitive inside information as soon as reasonably practicable as required under the SFO.
AcrossAsia, Cheok and Ang admitted that they had been late in disclosing inside information about a petition filed by AcrossAsia’s subsidiary and major creditor, PT First Media Tbk, against AcrossAsia and a related summons. Cheok and Ang also admitted that they had been negligent which resulted in AcrossAsia’s breach of the disclosure requirement.
The SFC’s allegations arise from the litigation in Indonesia between AcrossAsia and its subsidiary, PT First Media Tbk (PT First Media). At dispute was the failure of AcrossAsia to repay the money owed to PT First Media. The litigation led to enforcement proceedings by PT First Media against AcrossAsia, including insolvency-related proceedings in Indonesia against AcrossAsia by way of a petition dated 20 December 2012 and a summons dated 28 December 2012. These proceedings sought, among other things, to suspend AcrossAsia’s obligation for payment of debts temporarily to enable a composition plan to be presented to PT First Media and to appoint an Indonesian judge and administrators to manage AcrossAsia’s assets. AcrossAsia did not disclose this information until 17 January 2013.
The SFC alleged that the failure of AcrossAsia, Cheok and Ang to ensure timely disclosure of these court documents had resulted in the investing public not knowing about the possible insolvency of AcrossAsia and the possible loss of control over its major asset, and consequentially, the material increase in financial risks faced by AcrossAsia at the time.
The SFC considers that timely disclosure of inside information is central to the orderly operation of the market and underpins the maintenance of a fair and informed market.
The proceedings and the decision will be welcomed by fund managers as it demonstrates the SFC’s determination to take action on late disclosure of price sensitive inside information by listed companies. Fund managers sometimes find themselves inadvertently and unwillingly holding inside information as a result of preplacement soundings by listed companies or their agents, or discussions with management on company visits. The new statutory disclosure obligations and the MMT’s finding should encourage listed companies to make a public announcement if they share inside information prematurely.
The SFC’s press release is available here.